From the Perspective of Long-Run Product Costing,which of the Following

question 17

Multiple Choice

From the perspective of long-run product costing,which of the following is the best to use?

• A)Theoretical capacity for performance evaluation
• B)Practical capacity for pricing decisions
• C)Budgeted capacity utilisation to highlight unused capacity
• D)Normal capacity utilisation for benchmarking purposes

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Definitions:

Degree of Operating Leverage

A measure indicating how much sales revenue will translate into changes in operating income due to the proportion of fixed and variable costs.

Contribution Format Income Statement

An income statement format that segregates fixed and variable costs, directly showing the contribution margin.

Sales Commissions

A portion of sales revenue paid to sales employees as a reward for selling the company's products or services.

Net Operating Income

Earnings before interest and taxes (EBIT), representing the profit from normal business operations.